Increased Focus on Health Will Benefit Herbalife, Says Analyst

COVID-19 has brought several trends to the fore. Online retail and grocery sales, cloud-based services for remote working, video conferencing apps – have all benefited during the pandemic.

Having said that, Tigress Financial analyst Ivan Feinseth points out that a more traditional lifestyle choice is on the rise, and should be taken into account when considering Herbalife (HLF) as an investment.

“The recent health impact of the COVID-19 pandemic is showing that one of the best ways to stay healthy is to be healthy” said the 5-star analyst, adding, “HLF is starting to see a reemergence in growth trends driven by increasing consumer focus on a healthy lifestyle… Increasing consumer focus on good health will continue to drive further upside in the stock.”

Feinseth’s first calling card is Herbalife’s strong Q1 earnings report. Q1 net sales increased by 7.7% year-over-year to clock in at $1.3 billion, driven by a 29.4% increase in China and healthy U.S. demand. Herbalife’s unique “volume points” metric, which measures when products are paid for as opposed to when the customer receives the product, exhibited the largest gain in the company’s history, increasing year-over-year by 5.6% to $1.6 billion.

Sales remained strong during the pandemic, with preliminary volume-point growth for April, when COVID-19 was running rampant around the globe, coming in at 14% for the U.S. and 20% for China.

Moreover, a significant headwind appears to be winding down. A bribery case involving two former executives’ business activities in China is drawing to a close with a “tentative settlement,” in reach. The agreement will require that Herbalife pay $123 million in penalties, and will resolve the company of any criminal liability (if the company complies with regulations over the next three years, the fine may be dismissed entirely).

“The agreement settles this controversial overhang and paves the way for newly appointed CEO and Chairman Dr. John Agwunobi to maximize the strong brand equity and growth potential of the company,” Feinseth concluded.

To this end, the analyst has a Buy rating on Herbalife, although no specific price target was set. (To watch Feinseth’s track record, click here)

Only one additional analyst has reviewed Herbalife over the past three months, also rating the stock a Buy. Therefore, the consensus rating is a Moderate Buy, which comes with a $56 average price target. Expect upside of 28%, should the target be met over the next 12 months. (See Herbalife stock analysis on TipRanks)

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